[Congressional Record Volume 147, Number 46 (Monday, April 2, 2001)]
[Senate]
[Pages S3280-S3281]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH (for himself, Mr. Breaux, Mr. Jeffords, Ms. Snowe, 
        Mrs. Lincoln, and Mr. Allard):
  S. 677. A bill to amend the Internal Revenue Code of 1986 to repeal 
the required use of certain principal repayments on mortgage subsidy 
bond financing to redeem bonds, to modify the purchase price limitation 
under mortgage subsidy bond rules based on median family income, and 
for other purposes; to the Committee on Finance.
  Mr. HATCH. Mr. President, I rise today to introduce the Housing Bond 
and Credit Modernization and Fairness Act of 2001. I am joined in this 
effort by Senators Breaux, Jeffords, Allard, Lincoln, and Snowe. This 
legislation will bring about important adjustments in two of the most 
important and popular federal affordable housing programs that have 
been enacted, Housing Bonds, or single family Mortgage Revenue Bonds, 
MRBs, as they are commonly known, and the Low Income Housing Tax 
Credit. Identical legislation was recently introduced in the House by 
Congressmen Amo Houghton and Richard Neal.
  These programs are popular because they are state-administered, 
federal tax incentives to encourage private investment in first-time 
homebuyer mortgages for low and moderate-income families and privately 
developed and owned apartments for low-income renters. The changes 
proposed by this legislation were endorsed by the National Governors 
Association at its recent meeting. The Governors know how important the 
Housing Bond and Housing Tax Credit programs are in efforts to meet the 
housing needs of low and moderate-income families. The bill is also 
supported by the National Council of State Housing Agencies.
  Last year more than 80 members of this Body cosponsored legislation 
that was included in last year's Community Renewal Tax Relief Act of 
2000, which was signed into law by President Clinton. That legislation 
adjusted for past inflation in the operating levels of the Housing Tax 
Credit and MRB programs. Specifically, the Act increased the per capita 
low-income housing tax credit cap as well as the State-volume limits on 
tax-exempt private activity bonds, under which the MRB program falls. 
However, even with these long overdue changes, many people who are 
qualified to receive housing assistance under these programs cannot get 
it. The reason is that a few obsolete provisions in the programs stand 
in the way. The legislation we are introducing today will modernize 
these programs and remove these barriers. Specifically, the bill 
includes three changes.
  First, the bill would repeal the so-called Ten-Year Rule. This rule, 
which was enacted in 1988, prevents states from using mortgage payments 
received ten years after the original Mortgage Revenue Bond was issued 
to make new mortgage loans to additional qualified purchasers. A recent 
report by Merrill Lynch states, ``The Ten-Year Rule, to a large extent, 
offsets gains from the volume cap increase.'' Between 1998 and 2002, 
this rule will result in the loss of over $8.5 billion in mortgage 
authority, denying over 100,000 qualified lower income homebuyers 
affordable MRB-financed mortgages. Each year, the Ten-Year Rule will 
keep tens of thousands of additional qualified lower income homebuyers 
from getting an affordable MRB-financed mortgage, including many in my 
home State of Utah.

  Second, the bill would replace the current-law unworkable limit on 
the price of the homes these MRB mortgages can finance with a simple 
limit that works. Let me explain. Current law limits the price of homes 
purchased with MRB-financed mortgages to 90 percent of the average area 
home price. States have the option of determining their own purchase 
price limits or of relying on Treasury-published safe harbor limits. 
Most states rely on the Treasury limits because it is costly, 
burdensome, and often impossible to collect accurate and comprehensive 
sales price data.
  The problem is that, like many states, the Treasury Department does 
not have access to reliable and comprehensive sales price data. This 
has

[[Page S3281]]

especially been a problem for states, such as Utah, with many rural 
areas. In fact, Treasury last issued safe harbor limits in 1994, based 
on 1993 data. Home prices have risen approximately 30 percent in the 
past eight years, and in some areas of the country by a much higher 
percentage. This means that the MRB program simply cannot work in many 
parts of many states because qualified buyers cannot find homes priced 
below the outdated limits. To have an outdated and unworkable 
requirement that holds back the families that this program is designed 
to help is poor public policy that cries out for remedy.
  The bill we are introducing today would allow States to determine 
purchase price limits without reliance on nonexisting sales price data. 
It does this by limiting the purchase price to three and a half times 
the MRB qualifying income limit. In the 106th Congress, I joined my 
friend and colleague from Arkansas, Senator Lincoln, in introducing 
this provision as a stand-alone bill.
  Finally, the bill would make Housing Tax Credit apartment production 
more viable in many very low income, and especially rural, areas by 
allowing the use of the greater of area or statewide median incomes for 
determining qualifying income and rent levels. This is how income and 
rent levels are determined under the very successful multifamily bond 
program. Current law requires States to use area median income to 
determine eligible incomes of Housing Tax Credit tenants. In many very 
low income areas, median incomes are simply too low to generate 
sufficient rents to make these housing projects feasible. Data from HUD 
show that current income limits inhibit Housing Tax Credit development 
in as many as 1,700 of the 2,364 non-metropolitan counties across the 
country.
  The Housing Tax Credit and the MRB programs work and they are 
important to each State. The Congress recognized this last year by 
making the important adjustments in the operating levels of these 
programs to compensate for past inflation. More than 80 senators joined 
us in this effort by cosponsoring the legislation. This was a vital 
first step in improving the ability of these programs to meet the 
affordable housing needs of millions of Americans. Now, we must finish 
the job by correcting the problems in the programs that limit their 
effectiveness in delivering this affordable housing. For those of you 
that cosponsored these bills last year, and those of our colleagues who 
are new to the Senate, I am asking you to join this bipartisan effort 
of Senators from both rural and urban States to see that these 
important provisions are enacted this year.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objeciton, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 677

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Housing Bond and Credit 
     Modernization and Fairness Act of 2001''.

     SEC. 2. REPEAL OF REQUIRED USE OF CERTAIN PRINCIPAL 
                   REPAYMENTS ON MORTGAGE SUBSIDY BOND FINANCINGS 
                   TO REDEEM BONDS.

       (a) In General.--Subparagraph (A) of section 143(a)(2) of 
     the Internal Revenue Code of 1986 (defining qualified 
     mortgage issue) is amended by adding ``and'' at the end of 
     clause (ii), by striking ``, and'' at the end of clause (iii) 
     and inserting a period, and by striking clause (iv) and the 
     last sentence.
       (b) Conforming Amendment.--Clause (ii) of section 
     143(a)(2)(D) of such Code is amended by striking ``(and 
     clause (iv) of subparagraph (A))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to repayments received after the date of the 
     enactment of this Act.

     SEC. 3. MODIFICATION OF PURCHASE PRICE LIMITATION UNDER 
                   MORTGAGE SUBSIDY BOND RULES BASED ON MEDIAN 
                   FAMILY INCOME.

       (a) In General.--Paragraph (1) of section 143(e) of the 
     Internal Revenue Code of 1986 (relating to purchase price 
     requirement) is amended to read as follows:
       ``(1) In general.--An issue meets the requirements of this 
     subsection only if the acquisition cost of each residence the 
     owner-financing of which is provided under the issue does not 
     exceed the greater of--
       ``(A) 90 percent of the average area purchase price 
     applicable to the residence, or
       ``(B) 3.5 times the applicable median family income (as 
     defined in subsection (f)).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to financing provided, and mortgage credit 
     certificates issued, after the date of the enactment of this 
     Act.

     SEC. 4. DETERMINATION OF AREA MEDIAN GROSS INCOME FOR LOW-
                   INCOME HOUSING CREDIT PROJECTS.

       (a) In General.--Paragraph (4) of section 42(g) of the 
     Internal Revenue Code of 1986 (relating to certain rules made 
     applicable) is amended by striking the period at the end and 
     inserting ``and the term `area median gross income' means the 
     amount equal to the greater of--
       ``(A) the area median gross income determined under section 
     142(d)(2)(B), or
       ``(B) the statewide median gross income for the State in 
     which the project is located.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to--
       (1) housing credit dollar amounts allocated after the date 
     of the enactment of this Act, and
       (2) buildings placed in service after such date to the 
     extent paragraph (1) of section 42(h) of the Internal Revenue 
     Code of 1986 does not apply to any building by reason of 
     paragraph (4) thereof.

                          ____________________